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Gender diversity on Boards: the Appointment process and the role of executive search firms.

The appointment of women to FTSE 350-listed non-executive director roles is being held back by selection processes which ultimately favour candidates with similar characteristics to existing male-dominated board members, according to a new report released today by the Equality and Human Rights Commission.

The report, produced by Cranfield School of Management for the Equality and Human Rights Commission, is the first in-depth study into the appointment process to corporate boards and the role of executive search firms. It follows the recent Davies Review which called upon executive search firms to take on a more active role in increasing gender diversity on FTSE boards.

The report reveals that many chairmen and search firms recognise that gender diversity should be increased at board level. Search firms have introduced a voluntary code of conduct and had some success at getting more women on long lists. But when it comes to short-listing and appointing, successful candidates tend to be those who are perceived as ‘fitting in’ with the values, norms and behaviours of existing board members, who are largely men.

Interviews with senior consultants at 10 leading executive search firms in London, all signatories to the voluntary search code, reveal that search firms are beginning to challenge chairmen and nomination committees when defining briefs. In particular, this includes giving more importance to underlying competencies than their ‘fit’ with existing board members.

The research shows how selection of candidates based on ‘fit’ and previous board experience, rather than competencies, is self-perpetuating. It works against women who have had fewer opportunities to gain previous board level experience and limits the ability of chairmen to broaden the range of skills and experience of their boards.

As well as identifying examples of good practice at executive search firms, the report concludes that a more transparent, professional and rigorous approach to the selection process would allow chairmen and search agencies to appoint more female candidates and encourage more women to consider applying for roles as non-execs.

“Research shows that diverse boards produce better performance. Many companies recognise this. We commissioned this report to support their efforts to improve the representation of women at board level. However, the often subjective way of making appointments ends up replicating existing boards rather than bringing in talented women who could bring real benefits to individual company performance and ultimately help Britain’s economic recovery.”

Dr Elena Doldor, Senior Research Fellow from the Cranfield International Centre for Women Leaders and lead author of the report commented:

“Our research shows that ESFs are more willing to play a part in increasing board diversity and we identified a number of good practices in the sector. However, we noticed that search firms tend to focus their diversity initiatives on the first stages of the appointment process. In the later stages of the process, which entails short listing and interviewing, there needs to be more effort from headhunters and chairmen to ensure that selection practices remain inclusive. It is at these later stages of the process that the focus appears to inadvertently shift from candidates’ actual competencies to the slippery notion of ‘fit’. Despite increased awareness of the need to diversify boards, there are still ‘default preferences’ for candidates with certain backgrounds.”

“Over the past eighteen months the 30% Club has been pleased to see evidence of considerable progress towards better balanced UK boardrooms. Today's report suggests that more remains to be done around the recruitment process to further widen the choice of boardroom candidates, and as a result we expect the spotlight on this aspect of the issue to further add to the momentum for change."

The report revealed a lack of consensus among search firms when it came to what qualities are sought in board candidates beyond their experience. This lack of clarity leaves room for shifting criteria and subjective judgement in the appointment process.

Whilst the research revealed good practice amongst certain ESFs, it also revealed a lack of consensus with regards to the appointment process. To tackle this, the report makes recommendations including:

as intermediaries in the executive labour market, executive search firms need to set clear definitions as to what is sought from board candidates, beyond their experience.

executive search firms, chairmen and nomination committees need to review the interview process to make it more transparent, rigorous and professional.

executive search firms need to invest more time into developing relationships with women in the pipeline who could become executive or non-executive directors later in their careers.

executive search firms need to carry out regular reviews of the effectiveness of the voluntary code of conduct.